Aerospace and defense products & services provider, L-3 Communications Holdings Inc. LLL is scheduled to report its first-quarter 2015 earnings results before the opening bell on Apr 30, 2015.
Last quarter, L-3 Communications had marked a 3.65% positive earnings surprise. Let’s see how things are shaping up for the first quarter.
Factors to Consider This Quarter
L-3 Communications Holdings operates through its wholly owned subsidiary, L-3 Communications Corp. (L-3). L-3 Communications is a leading supplier of a broad range of aerospace and defense products.
The company has lately been focusing on reshaping its portfolio through acquisitions and non-core asset sale. L-3 Communications acquired MITEQ and Data Tactics in 2014 which are expected to bring growth opportunities for the Communication Systems segment and ISR business.
L-3 Communications keeps winning contract from foreign military as well due to its diverse product offerings. A steady flow of these foreign contracts will also help counter the sequestration impact. L-3 Communications, like other defense biggies, is focused on expanding its international footprint in view of budget uncertainties at home.
However, the company’s funded backlog declined 1% to $10.2 billion as of Dec 31, 2014 from $10.4 billion as of Dec 31, 2013.
Earnings Whispers?
Our proven model does not conclusively show that L-3 Communications will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That's not the case here, as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.65%. This is because the Most Accurate estimate stands at $1.52 per share, lower than the Zacks Consensus Estimate of $1.53.
Zacks Rank: Though L-3 Communications has an impressive Zacks Rank #1, its -0.65% ESP obscures the earnings prediction.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some stocks in the aerospace and defense industry you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:
General Dynamics Corp. GD has an earnings ESP of +0.52% and a Zacks Rank #2.
KLX Inc. KLXI has an earnings ESP of +7.90% and a Zacks Rank #3.
Northrop Grumman Corp. NOC has an earnings ESP of +1.33% and a Zacks Rank #3.
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